It means the word ‘contract’ will include the following activities specifically.

Advertising

Broadcasting and telecasting

Transportation of Goods and passengers except by railways.

Catering

Manufacturing or supply of any product according to the requirement or specification of the customer by using the material purchased form the customer. It will not apply if material is purchased from other than customer it will be case of sale.

Please note that above list is in addition to the normal meaning given by the section 194C to the word ‘Contract’.

When section 194C is applicable?

When any person responsible for paying any sum to a resident contractor for carrying out any work in connection with a contract, including sub contract, shall deduct tax at source under this section.

The tax deduction at source under this section shall be made either at the time of payment or credit whichever is earlier.

Who needs to deduct TDS under section 194C?

For the purpose of this section , the payer may be;

Central gov. or any state gov.

Local authority

Central/state provincial corporation

Company

Cooperative societies

Housing board

Trust

University

Any foreign government or a foreign enterprise or any association or body established outside India

Firm

HUF

Individual

AOP

BOI

Exception for Individual and HUF

After reading above, are you worrying that next time you will have to deduct TDS for your personal contract payments like payment for interior designing contract of your home etc.

You need not to worry.

There are some exceptions for Individuals and HUF.

Where the payer is an individual, HUF, AOP or BOI, the provisions of section 194c are not applicable where the total sales, gross receipts or turnover of such individual, HUF, AOP or BOI form the business or profession carried on by them does not exceeds the monetary limits specified u/s 44AB( Rs. 1 crore in case of business and Rs. 25 lakh in case of profession) during th financial year in which sum is credited or paid- As per explanation to section 194C(7).

Where any sum paid or credited to the account of the contractor by an individual or HUF, and such sum is incurred exclusively for personal purposes of such individual or any member of HUF, tax need not be deducted at source-Sec 194C(4).

What is the rate of TDS under section 194c?

Nature of Payee

Rate of Taxes

In case of Payee is an individual or HUF

1% of the contract value

Other than individual and HUF

2% of the contract value

Where the payee has not furnished PAN, tax @20% shall be deducted.

What is the limit for TDS under section 194C?

The payer is responsible to deduct tax at source where:

The amount of any single sum credited or paid to the contractor exceeds Rs. 30,000; or

The aggregate amount of such sums credited or paid or likely to be credited or paid to the contractor during the financial year exceeds Rs. 75,000.

Hey readers, welcome to my blog investsaver.com. I am Chartered Accountant by Profession and I love to write on tax & money matters. You may ask your queries through comments related to the topic, I will be happy to answer them.

Share this:

Related

Comments

w.e.f. 1-6-2015 in case of payment of transport freight at a single transaction of more than Rs. 30000/- or of more than Rs. 75000/- in a year then TDS will have to be deducted @ 1% and in case of recipient being firm or a company then TDS @ 2% will have to be made. if the recipient own 10 or less goods carriage he can give a declaration to this effect then TDS will not be deducted even if payment exceeds the threshold of Rs.30000 / Rs.75000. Till now Income tax rules have not been notified for 2015 therefore format of declaration to be obtained in case of 10 or less truck has not also been notified yet now therefore until specified format comes self declaration from truck owner can be obtained.